Home equity loan

[xiownthisplacex]

My home is paid for, no loan on it. I want to get a second house so I can rent it out. It is very cheap, under $50,000. I'm 99% sure I don't qualify for a mortgage because I have a commission job and I don't have 2 years of IRS done yet. So I would need to take out a home equity loan.

My question is, does a home equity loan look like a mortgage on CR? Meaning, does it impact my score like a mortgage does? Or is it just like any other loan?

[Quips]

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@xiownthisplacex wrote:

My home is paid for, no loan on it. I want to get a second house so I can rent it out. It is very cheap, under $50,000. I'm 99% sure I don't qualify for a mortgage because I have a commission job and I don't have 2 years of IRS done yet. So I would need to take out a home equity loan.

My question is, does a home equity loan look like a mortgage on CR? Meaning, does it impact my score like a mortgage does? Or is it just like any other loan?

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Depends on the loan terms - if it is a Home Equity Line of Credit that you can tap into up to the credit limit whenever you want, it will report as revolving debt and will be treated like a new credit card.  If it is an installment type home equity loan then it will report as mortgage/installment debt.

[xiownthisplacex]

Thanks Quips, it will be an installment type.

[Jazzzy]

How it is handled by the credit reporting agencies could depend upon the amount. What we've sometimes seen in the past is that home equity loans below a certain amount will report as revolving credit like credit cards. Those of a higher amount will report as installment debt.

We did the same thing you are doing. Our home was paid off and we did a home equity line of credit to purchase a rental property. We love the flexibility of the equity line. Our line is $159k, so ours reports as installment, but creditors will most often just consider it to be a mortgage.